Ultra-high net worth Investors (UHNIs) looking for investment options other than the regular debt and equity are turning to Alternative Investment Funds (AIFs). Until recently, most AIFs invested in real estate, private equity or venture capital. A new category that is slowly emerging is funds that invest in stressed assets or non-performing assets (NPAs).
These funds invest in troubled assets sold by banks, asset reconstruction companies (ARCs) or, in some cases, by promoters or sponsors of the companies. The money raised is used to revive these stressed companies or projects and turn them around. Once the companies are operational and start generating revenue, investors get their returns.
Edelweiss Group was the first to launch such a fund, in 2012, called the Edelweiss Stressed and Troubled Assets Revival Fund (E-STAR). Recently, Srei Alternative Investment Managers (SAIML) launched a similar one, India Vision Fund. As these funds are in the AIF category, the minimum investment is Rs 1 crore.
However, these are only for select investors, even among UHNIs, say experts. These funds are targeted at investors with capital, can understand the risk and are looking at this as the core component, as the fixed income-plus component of their portfolio, says Nalin Kumar, investment head, SAIML. "This fund is for investors who can understand the risks.''
Vaibhav Sanghavi, managing director, Ambit investment Advisors, says he'd advise clients to invest in such a fund for diversification. Stressed asset funds are in an illiquid space but provide great opportunity. "It requires a huge amount of domain expertise to invest in distressed assets. It is pertinent for investors to assess the risk-return matrix,'' he says.
There is opportunity only if there is recovery, points out Rajendra Kalur, director and chief executive, TrustPlutus Wealth Managers. "There is scope for value buying because the assets are available at a discount or haircut. But, one needs to be patient and well-informed in terms of documentation and contract details,'' he says.
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